St. Vincent de Paul Village, Inc.

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1 Financial Statements and Compliance Reports Years Ended December 31, 2014 and 2013

2 Contents Independent Auditors Report 3-4 Financial Statements Statements of Financial Position 5 Statements of Activities 6 Statements of Cash Flows 7-8 Statements of Functional Expenses Supplemental Schedules Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards 38 Independent Auditors Report on: Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Compliance for Each Major Federal Program and Report on Internal Control over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs

3 Independent Auditors Report To the Audit Committee St. Vincent de Paul Village, Inc. San Diego, California Report on the Financial Statements We have audited the accompanying financial statements of St. Vincent de Paul Village, Inc. (the Village ), a nonprofit corporation, which comprise the statements of financial position as of December 31, 2014 and 2013, and the related statements of activities, and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of St. Vincent de Paul Village, Inc. as of December 31, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The Statements of Functional Expenses on pages 9 and 10 are presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Supplemental Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 26, 2015 on our consideration of the Organization s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the St. Vincent de Paul Village s internal control over financial reporting and compliance. San Diego, California May 26, 2015

5 Statements of Financial Position December 31, Assets Current assets: Cash $ 463,302 $ 1,923,179 Investments 1,552,222 1,451,484 Grants receivable 1,590,184 1,254,432 Contributions receivable 1,120, ,765 Pledge receivable, current portion 400,000 - Bequests receivable 1,143, ,762 Prepaid expenses and other receivables 1,158, ,789 Total current assets 7,428,408 6,126,411 Property and equipment: Equipment, furniture and vehicles 3,076,816 2,824,633 Buildings and leasehold improvements 5,236,924 3,732,163 Construction in process 27, ,378 8,341,662 6,900,174 Less accumulated depreciation and amortization (5,095,450) (4,673,731) Net property and equipment 3,246,212 2,226,443 Other assets: Investment in limited partnership Deposit 72,000 72,000 Pledge receivable, less current portion, net of discount 1,059,751 - Pooled income fund 135, ,599 Charitable remainder trust 369, ,769 Development fee receivable from affiliates 107, ,405 Due from Martha's Village and Kitchen, Inc. 968,057 1,006,811 Cash surrender value of insurance 202, ,093 Beneficial interest in gift annuity 36, ,131 Beneficial interest in perpetual trusts 1,252,047 1,244,764 Endowment fund 2,928,210 2,877,377 Total other assets 7,131,582 6,238,000 Total assets $ 17,806,202 $ 14,590,854 Liabilities and Net Assets Current liabilities: Accounts payable and accrued liabilities $ 1,630,148 $ 1,924,422 Deferred rent, current portion 4,410 - Deferred grant revenue 32,499 12,501 Total current liabilities 1,667,057 1,936,923 Deferred rent, less current portion 6,870 - Margin loan 12, ,899 Line of credit 1,500,000 1,000,000 Due to S.V.D.P. Management, Inc. 7,380,415 5,336,249 Forgivable debt 2,046,800 1,330,177 Total liabilities 12,614,114 10,055,248 Net assets: Unrestricted (2,204,908) (652,038) Temporarily restricted 3,389,322 1,356,661 Permanently restricted 4,007,674 3,830,983 Total net assets 5,192,088 4,535,606 Total liabilities and net assets $ 17,806,202 $ 14,590,854 The accompanying notes are an integral part of these financial statements. 5

6 Statements of Activities Years Ended December 31, Changes in unrestricted net assets: Revenue, contributions and other: Contributions from organizations, foundations and individuals $ 10,223,102 $ 8,580,519 Sales of donated goods 4,728,637 4,139,706 Grants 7,831,665 8,366,420 Contributions from S.V.D.P. Management, Inc. 600,000 1,200,000 Special events, net of direct benefit expense of approximately $113,000 and $159,000, respectively 659, ,789 Interest, investment, shared expenses and other income 568, ,913 Net medical revenue 1,268,303 1,001,913 Net assets released from donor restrictions 597, ,005 Total revenue, contributions and other 26,477,312 25,851,265 Expenses, contributions and other: Programs and services for the homeless 19,986,132 19,266,218 Cost of retail program 3,868,213 3,548,363 Fundraising 1,940,924 1,763,520 Administration 2,234,913 2,350,294 Total expenses, contributions and other 28,030,182 26,928,395 Change in unrestricted net assets (1,552,870) (1,077,130) Changes in temporarily restricted net assets: Contributions 2,716, ,955 Change in value of split interest agreements (24,710) (27,807) Net realized and unrealized gain (loss) on endowment fund (111,963) 123,669 Net assets released from donor restrictions (547,317) (942,477) Change in temporarily restricted net assets 2,032,661 (616,660) Changes in permanently restricted net assets: Contributions 167,121 57,800 Change in value of permanently restricted net assets 60,048 97,420 Net assets released from donor restrictions (50,478) (51,528) Change in permanently restricted net assets 176, ,692 Change in net assets 656,482 (1,590,098) Net assets at beginning of year 4,535,606 6,125,704 Net assets at end of year $ 5,192,088 $ 4,535,606 The accompanying notes are an integral part of these financial statements. 6

7 Statements of Cash Flows Years Ended December 31, Operating Activities Change in net assets from operations $ 656,482 $ (1,590,098) Reconciliation of change in net assets to net cash used in operating activities: Depreciation and amortization 421, ,006 Change in value of temporarily restricted split interest agreements 24,710 27,807 Change in value of permanently restricted split interest agreements (60,442) (88,892) Distributions from permanently restricted split interest agreements 74,902 50,046 Contributions of securities (716,714) (546,980) Contributions restricted for long-term purposes (167,121) (57,800) Realized and unrealized gain on investments (44,024) (50,749) Realized and unrealized (gain) loss on endowment 111,963 (123,669) Change in cash surrender value of insurance (35,733) (40,924) Gain on sale of property held for sale - (91,000) Gain on investment in limited partnership (7) (41) Forgiveness of debt - (443,194) Changes in operating assets and liabilities: Deposit - 75,000 Grants receivable (335,752) 19,802 Contributions receivable (944,571) 694,235 Pledges receivable (1,459,751) - Bequests receivable (450,752) - Prepaid expenses and other receivables (530,061) (519,765) Development fee receivable from affiliates 60, ,000 Due from Martha's Village and Kitchen, Inc. 38,754 (13,815) Beneficial interest in gift annuity 114,809 - Accounts payable and accrued liabilities (244,400) 530,206 Deferred grant revenue 19,998 (16,664) Deferred rent 11,280 Due to S.V.D.P. Management, Inc. 2,044,166 1,898,788 Net cash provided by (used in) operating activities (1,410,547) 199,299 Investing Activities Purchases of property and equipment (1,441,486) (544,130) Proceeds from sale of investments 685,987 32,298 Purchases of investments (188,783) (105,073) Proceeds from sale of property held for sale - 291,000 Net cash used in investing activities (944,282) (325,905) Financing Activities Proceeds from forgivable debt 666, ,177 Net proceeds from line of credit 500,000 - Principal payments on margin loan (438,927) (144,673) Contributions restricted for long-term investment 167,121 57,800 Distribution from limited partnership 9 - Capital contribution to limited partnership - (10) Net cash provided by financing activities 894, ,294 Net change in cash (1,459,877) 71,688 Cash, beginning of year 1,923,179 1,851,491 Cash, end of year $ 463,302 $ 1,923,179 The accompanying notes are an integral part of these financial statements. 7

8 Statements of Cash Flows, Continued Years Ended December 31, Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 102,144 $ 158,796 Noncash Investing and Financing Activities: The Village received stock contributions of $716,714 and $546,980 for the years ended December 31, 2014 and 2013, respectively. Of which, $50,000 and $24,558 of the stock contributions received were contributions to the permanently restricted endowment. The accompanying notes are an integral part of these financial statements. 8

9 Statement of Functional Expenses Year Ended December 31, 2014 Housing and Supportive Medical Cost of Management Total Services Clinic Toussaint Total Retail Program and General Fundraising Expenses Salaries & Employee Related Expenses $ 6,743,677 $ 1,118,892 $ 765,860 $ 8,628,429 $ 1,694,613 $ 420,386 $ 434,000 $ 11,177,428 Rent 2,554, , ,897 2,772, , ,929 66,072 3,511,896 Food 2,044, ,129 2,109, ,110,226 Contract Services 2, , ,296-1,546, ,509 1,926,575 Employee Benefits 850,672 98,601 88,546 1,037, ,675-30,566 1,318,060 Miscellaneous 786,028 65,954 46, , ,285 10,342 98,036 1,191,903 Utilities 667,773 38,138 69, , , ,022,167 HUD Sub-Recipient Expenses 863, , ,241 Contract Services - UCSD - 511, , ,215 Professional Fees 4, ,785 13, ,964 8,893 47,111 83, ,029 Vehicle 65, ,286 78, , ,505 Repair & Maintenance 366,166 11,809 27, ,804 16,634-6, ,210 Insurance 292,134 15,018 9, ,557 50,584-57, ,626 Depreciation 321,039-24, ,302 76, ,717 Supplies 318,775 11,979 9, ,898 38,501-1, ,911 Commodities Donations to Others , ,541 Advertising , , ,968 Printing 1,610 1, ,802 3, , ,494 Special Events , ,727 Postage 2, ,757 2, , ,504 Medical & Dental 9, , , ,113 Telephone 74,055 3,885 10,694 88,634 30,641-8, ,523 Direct Client Expenses 69,702 6,069 42, , ,603 Total $ 16,038,484 $ 2,649,220 $ 1,298,428 $ 19,986,132 $ 3,868,213 $ 2,234,913 $ 1,940,924 $ 28,030,182 % of Total 57% 9% 5% 71% 14% 8% 7% 100% The accompanying notes are an integral part of these financial statements. 9

10 Statement of Functional Expenses Year Ended December 31, 2013 Housing and Supportive Medical Cost of Management Total Services Clinic Toussaint Total Retail Program and General Fundraising Expenses Salaries & Employee Related Expenses $ 6,908,983 $ 1,071,587 $ 759,474 $ 8,740,044 $ 1,675,892 $ 539,472 $ 324,138 $ 11,279,546 Rent 2,525, , ,258 2,748, , ,824 66,073 3,450,403 Contract Services 1, , ,030-1,529,559 82,919 1,789,508 Food 1,681, ,385 1,733,401 20, ,753,887 Employee Benefits 751,292 81,235 85, , ,370-21,562 1,115,506 Miscellaneous 698,379 94,651 55, , ,876 26,664 59,873 1,076,005 HUD Sub-Recipient Expenses 874, , ,955 Utilities 567,983 36,431 58, , , ,541 Supplies 337,789 34,813 45, ,414 57,634-2, ,270 Vehicle 69, ,483 79, , ,456 Contract Services - UCSD - 420, , ,322 Printing ,401 24, , ,682 Professional Fees 33, ,640 20, ,971 4,827 47,775 12, ,188 Repair & Maintenance 301,316 23,959 28, ,420 14,700-4, ,279 Insurance 241,376 18,115 4, ,441 48,910-56, ,024 Depreciation 255,046-28, ,566 76, ,006 Advertising , , ,849 Special Events , ,684 Commodities Donations to Others , ,407 Postage 1, ,695 18, , ,851 Medical & Dental 13, , , ,340 Telephone 109,878 2,801 9, ,098 24,030-5, ,800 Direct Client Expenses 96,056 6,759 28, , ,886 Total $ 15,469,579 $ 2,502,191 $ 1,294,448 $ 19,266,218 $ 3,548,363 $ 2,350,294 $ 1,763,520 $ 26,928,395 % of Total 57% 9% 5% 71% 13% 9% 7% 100% The accompanying notes are an integral part of these financial statements. 10

11 1. Organization and Significant Accounting Policies Organization The accompanying financial statements present the operations of St. Vincent de Paul Village, Inc. (the Village ). The Village is comprised of the following operating activities: Programs and Services for the homeless and those at-risk for homelessness (the Centers which are Joan Kroc Center, Bishop Maher Center, Josue AIDS Homes and Paul Mirabile Center): The Centers provide comprehensive services for homeless men, women and children. They provide interim, transitional and rapid re-housing programs, as well as, an array of services including medical and dental care, case management, meals, job skills training, addiction treatment, mental health services and therapeutic childcare. The Centers receive support through state and Federal grants, foundations and contributions from Fundraising and Retail activities. Medical Clinic: The medical and dental services provided by the Centers are through our licensed primary care clinic that is a Federally Qualified Health Center (FQHC). The services provided are primarily sourced by a combined residency program in psychiatry and family medicine with the University of California San Diego (UCSD), a premier partnership and training site which is considered to be a best practice approach to serving the homeless. Toussaint Academy San Diego ( TASD ) is a licensed group home that services homeless youth. TASD provides residents with medical services, meals, education and life skills support, as well as, a safe place to live. Retail: Retail's primary source of funds is from the sale of donated used furniture, clothing and other items through daily warehouse auctions, the furniture warehouse and three retail thrift stores. Fundraising: Through its fundraising efforts, the Village finances shelter, food and charity programs. 11

12 Organization, cont d S.V.D.P. Management, Inc., ( S.V.D.P. ), is an affiliated organization which develops, maintains and leases property, and provides funding and services to the Village for its operating activities. Martha s Village & Kitchen, Inc. ( MVK ) is located in Indio, California and provides shelter, food, and other services similar to the Village programs. The Village provides administrative support to MVK in executing the model developed by the Village. Basis of accounting Investments The accompanying financial statements are prepared on the accrual basis of accounting in accordance with the authoritative guidance related to not-forprofit entities. Accordingly, the Village is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. The Village carries investments in equity securities with readily determinable fair values and investments in debt securities at fair value with realized and unrealized gains and losses included in the statement of activities in accordance with authoritative guidance. Investments consist of marketable securities and are accounted for as follows: Marketable securities consist of mutual funds, equity, and fixed income securities and are recorded at fair market value. The fair value of investments in securities is based on quoted market prices and is valued at the closing price on the last business day of the year. Realized gains and losses on the sale of investments are calculated using the specific-identification method. Unrealized gains and losses represent the change in the fair market value of the individual investments for the period or since the acquisition date, if acquired during the period, and are recorded as a component of unrestricted net assets, unless restricted by donor. Donated investments are initially recorded at fair value on, or near, the date of the gift. 12

13 Contributions, pledges and bequests The Village records contributions, pledges and bequests consisting of cash and other assets by donors at fair value in the period in which the commitment is made. Contributions receivable consist of contributions received within 21 days of year end that are dated prior to year end. Pledges receivable consist of unconditional promises to give. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. Discounts on those amounts are computed using interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contributions. Conditional promises to give are recognized when the conditions are substantially met in accordance with the authoritative guidance. Bequests receivable consist of trusts held by others in which the donor has passed, and the Village is named as a beneficiary. Restricted contributions, whose restrictions are met within the same reporting period, are recorded as unrestricted contributions. Medical clinic revenue and receivable As a FQHC, the Village provides services to all persons regardless of their ability to pay, using a sliding fee scale based on patient family size and income. Some patients are covered by Medi-Cal and other insurance payors. These payors limit payment for services based upon their respective schedules of usual, customary, and reasonable fees. Being a FQHC allows the Village to obtain additional reimbursement for the services provided. Accounts receivable consist of amounts billed for services provided. The allowance for estimated uncollectible accounts is based on past experience and on an analysis of current receivable balances. Accounts deemed uncollectible are written-off in the period deemed uncollectible. The allowance is recorded as a deduction from the medical clinic revenue. Management determined an allowance for doubtful accounts of approximately $346,000 was necessary at December 31, 2014 and Grants revenue and receivable The Village is awarded grants from Federal, state, county and city agencies. Those grants funded renew annually, with the amount awarded negotiated in advance. Grant revenue is recognized as revenue when the related program costs are incurred. Unexpended grant funds received in advance of the related expenditures are reported as deferred grant revenue and are minimal in value. 13

14 Grants revenue and receivable, cont d Donated goods Expiration of donor restrictions At December 31, 2014 and 2013 the Village had approximately $1,590,000 and $1,254,000, respectively, in grants receivable. Management has determined that no allowance is necessary on the grants receivable. The Village recognizes revenue related to the sale of donated food, furniture, clothing and other items at the time of sale. The expiration of a donor restriction on a contribution is recognized in the period in which the restriction expires and at that time the related resources are reclassified to unrestricted net assets. A restriction expires when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both. Long-lived assets The Village records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Use of estimates Concentration of credit risk Contributed services The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates used in preparation of these financial statements include the valuation of split-interest agreements, beneficial interest in perpetual trusts, and the functional allocation of expenses. Financial instruments which potentially subject the Village to concentrations of credit risk consist primarily of cash. The Village maintains its cash with high-credit quality financial institutions. At times, such amounts may exceed federally insured limits. The Village has not experienced any losses in such accounts. Management believes that the Village is not exposed to any significant credit risk with respect to its cash. Services provided by volunteers in the medical and dental clinics are measured by the fair value of the service received. Contributed services of approximately $284,000 and $263,000 were included in contribution income on the statements of activities and professional fees on the statements of functional expenses for 2014 and 2013, respectively. Other services received from volunteers are not of a type permitted to be recognized in the financial statements in accordance with the authoritative guidance; thus, no value was recorded. 14

15 Property held for sale Property and equipment Income taxes Advertising Functional expenses Reclassifications Property held for sale is stated at estimated fair value at the date of contribution and impairment losses are recorded when indicators of impairment are present. The fair value is determined using market prices of similar properties. Property and equipment is stated at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets, which range from five to ten years. Leasehold improvements are amortized over the shorter of the life of the asset or the lease term. All items with a value of $5,000 or greater are capitalized. Depreciation expense was approximately $422,000 and $360,000 for 2014 and 2013, respectively. The Village is exempt from income taxes on the basis that it qualifies under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. All tax-exempt entities are subject to review and audit by federal, state and other applicable agencies. Such agencies may review the taxability of unrelated business income, or the qualification of the organization as a tax-exempt entity under Internal Revenue Code 501(c)(3) and applicable state statutes. At December 31, 2014, the federal statute of limitation remains open for the 2011 through 2014 tax years. The statute of limitations for the state income tax returns remains open for the 2010 through 2014 tax years. The Village expenses advertising costs as incurred. Advertising costs were approximately $374,000 and $403,000 for 2014 and 2013, respectively. The cost of providing various programs and services has been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and services benefited. Certain reclassifications have been made to the 2013 balances to conform to the 2014 financial statement presentation. These reclassifications have no affect on total reported net assets or change in net assets. 2. Related Party Transactions Related party rental expense The Centers rent their facilities from S.V.D.P., Village Place, L.P., Toussaint Teen Center, L.P. and 15th & Commercial, L.P., all affiliates, under long-term operating leases that expire at various dates through The Centers rental expense was approximately $2,748,000 and $2,709,000 for 2014 and 2013, respectively. 15

16 Related party rental expense, cont d Fundraising paid approximately $66,000 in 2014 and 2013 to S.V.D.P. under a lease for office space. Retail leases two warehouses from S.V.D.P. as well as retail space from 16th and Market, L.P. Total rent expense under these leases was approximately $289,000 and $284,000 for 2014 and 2013, respectively. 15th & Commercial, L.P. operating subsidy and CAM charges Contract services with S.V.D.P. Management, Inc. Due to/from S.V.D.P. Management, Inc. Total future minimum lease payments in the years subsequent to December 31, 2014 are as follows: Year Ending December 31, Centers Retail Fundraising Total 2015 $ 2,797,023 $ 292,877 $ 66,073 $ 3,155, ,692, ,778-2,986, ,114, ,778-2,408, ,891, ,891, ,887, ,887,425 Thereafter 204, ,890 Total $ 11,587,798 $ 880,433 $ 66,073 $ 12,534,304 An operating subsidy is mandated by the 15th & Commercial, L.P. transitional housing lease. Per the lease agreement, on December 3 of each calendar year the Village shall pay 15th & Commercial, L.P. a subsidy payment in an amount equal to the Section 42 Breakpoint less the amount of property expenses that the Village paid for the calendar year. This payment is to supplement the difference between the maximum allowable California Tax Credit Allocation Committee ( TCAC ) rent rate charged to tenants and the cost to maintain the units. The subsidy was approximately $143,000 and $184,000 in 2014 and 2013, respectively. The Village pays CAM charges for the two properties leased from 15th & Commercial, L.P. The CAM charges were approximately $403,000 and $317,000 in 2014 and 2013, respectively. S.V.D.P. has a service contract with the Village to provide administrative services. The charges under this contract were approximately $1,624,000 and $1,606,000 in 2014 and 2013, respectively. The Village and S.V.D.P. provide cash advances and contributions to each other from time to time. The Village owed S.V.D.P. $7,380,000 and $5,336,000 as of December 31, 2014 and 2013, respectively. 16

17 Contributions from S.V.D.P. Management, Inc. Pass-through grant to S.V.D.P. Management, Inc. The Village received contributions from S.V.D.P. to support operations in the amount of approximately $600,000 and $1,200,000 in 2014 and 2013, respectively. The Village has been awarded a grant from the Department of Housing and Urban Development to fund the continuum of care program. Village passed through approximately $23,000 and $22,000 of continuum of care funding to S.V.D.P. in 2014 and 2013, respectively. Due from Martha s Village and Kitchen, Inc. Investment in Village Place Apartments, L.P. The Village provides cash advances to MVK, an affiliate of the Village, from time to time. As of December 31, 2014 and 2013, MVK owed the Village approximately $968,000 and $1,007,000, respectively. A significant portion of this balance is related to payroll expenses paid by the Village on behalf of MVK. During 2014 the Village recognized a gain on investment in limited partnership of $7 which is included in interest, investment, shared expenses and other income on the statement of activities and received a distribution of $9. The investment in limited partnership is stated at estimated fair value. The value of the investment in the partnership was $49 at December 31, During 2013 the Village purchased a 0.01% limited partnership interest in Village Place Apartments, L.P. The Village made an investment of $10 and recognized a gain on investment in limited partnership of $41 which is included in interest, investment, shared expenses and other income on the statement of activities. The investment in limited partnership is stated at estimated fair value. The value of the investment in the partnership was $51 at December 31, Leases In addition to the related party leases described in Note 2, the Village leases thrift stores under noncancelable operating leases that expire at various dates through Rent expense under these operating leases was approximately $174,000 and $145,000 for 2014 and 2013, respectively. The Village also has non-cancelable lease agreements for vehicles that expire at various dates through The leases include both a fixed amount for the vehicles, and a variable rate depending on the number of miles driven. The rental amounts include a CPI increase after 24 months from the date the Village entered into the leases. Rent expense under these 17

18 3. Leases, Cont d operating leases aggregated to approximately $219,000 and $223,000 for 2014 and 2013, respectively. Aggregate future minimum lease payments under operating leases in the years subsequent to December 31, 2014 are as follows: Year Ending December 31, Thrift Stores Vehicles Total 2015 $ 164,471 $ 177,313 $ 341, , , , , , , , , , , , ,118 Thereafter 271, , ,667 $ 846,913 $ 1,323,873 $ 2,170, Grant Agreements The Village has entered into seven grant agreements with the U.S. Department of Housing and Urban Development ( HUD ) and other governmental agencies whereby these grants will subsidize a portion of the operating costs of the Family Living Center Program, TASD, Fresh Start Program, Solutions Projects Four, Solutions Projects Two and Five., and Rapid Re-Housing for Families (RRHFF) Program. HUD funds are also passed through to S.V.D.P. The Village is committed to certain matching funds that are to be provided by Fundraising. The seven agreements designate the following commitments for the years ending December 31, 2015 and 2016: Grant Agreement Commitment Family Living HUD Commitment $ 508,728 $ 127,182 Center Village Commitment 127,182 31,796 $ 635,910 $ 158,978 Toussaint Academy HUD Commitment $ 395,425 $ 98,856 San Diego Village Commitment 98,856 24,714 $ 494,281 $ 123,570 Fresh HUD Commitment $ 611,853 $ 203,951 Start Village Commitment 152,963 50,988 $ 764,816 $ 254,939 18

19 4. Grant Agreements, Cont d Solutions Project HUD Commitment $ 845,115 $ 70,426 Four Village Commitment 202,271 16,856 $ 1,047,386 $ 87,282 Solutions Project HUD Commitment $ 879,930 $ 220,933 Two and Five Village Commitment 209,891 51,869 $ 1,089,821 $ 272,802 Boulevard HUD Commitment $ 44,214 $ 33,144 Apartments Village Commitment 11,055 8,291 $ 55,269 $ 41,435 RRHFF HUD Commitment $ 325,695 $ 325,695 Program Village Commitment 81,424 81,424 $ 407,119 $ 407,119 HUD Commitment $ 3,610,960 $ 1,080,187 Summary Village Commitment 883, ,938 $ 4,494,602 $ 1,346,125 These grant agreements and certain other grant support are subject to review by the grantor agencies, which could lead to requests for reimbursements by the grantor agencies for expenditures disallowed under the terms of the grants. Management believes that such disallowances, if any, will not be significant. The Village is a pass-through entity for certain HUD projects. As a result, it has contracted with sub-recipients to perform the tasks required by the project agreements. The following is a summary of commitments to the subrecipients for the years ending December 31, 2015 and 2016: Totals Solutions Project Four $ 457,450 $ 38,121 $ 495,571 Solutions Project Two and Five 427, , ,160 Boulevard Apartments 22,038 16,512 38,550 Totals $ 907,108 $ 197,173 $ 1,104,281 19

20 5. Development Fee Receivable from Affiliates (k) Profit Sharing 7. Prepaid Expenses and Other Receivables On February 12, 2002, the Village and Chelsea Investment Corporation ( CIC ) entered into an agreement with Villa Harvey Mandel, L.P., an affiliate of the Village, to supervise and oversee the development of the Villa Harvey Mandel project for a development fee of approximately $1,095,000. The development fee was earned as services were performed. The Village will receive 60% and CIC has received 40% of the development fee. A portion of the fee was deferred and the cash portion of the development fee has been paid in full to CIC. As of December 31, 2014 and 2013, approximately $107,000 and $167,000, respectively, of the development fee remained due to the Village. The Village participates in a profit-sharing retirement plan that covers all eligible employees of the Village and its partner agencies. Each organization makes matching contributions on a discretionary basis. There was no matching contribution made to the plan for the years ended December 31, 2014 and The Village s prepaid expenses and other receivables are comprised of the following: December 31, Net medical clinic receivable $ 924,432 $ 452,589 Prepaid expenses 188, ,174 Accounts receivable 41,563 55,110 Inventory 4,044 5,916 Prepaid expenses and other receivables $ 1,158,850 $ 628, Investments The cost and fair value of investments are summarized as follows: December 31, 2014 Cost Fair Value Mutual funds $ 950,542 $ 934,060 Cash 573, ,488 Municipal bonds 20,000 20,283 Equities - 24,241 Estimated accrued interest Totals $ 1,544,030 $ 1,552,222 20

21 8. Investments, Cont d December 31, 2013 Cost Fair Value Mutual funds $ 860,779 $ 891,213 Cash 408, ,895 Municipal bonds 125, ,877 Equities ,447 Estimated accrued interest - 2,052 Totals $ 1,395,362 $ 1,451,484 Fair values have been determined by reference to the most recent market quotations for the respective investments. Investment return included in interest, investment, shared expenses and other income are comprised of the following: December 31, Investment income $ 65,970 $ 39,788 Realized gain 41 - Unrealized gain (loss) (13,934) 17,188 Fees (8,053) (6,227) Totals $ 44,024 $ 50, Pooled Income Fund and Charitable Remainder Trust The Village is the beneficiary under one pooled income fund and a charitable remainder trust that are administered by third parties. The pooled income fund is an arrangement whereby donors contribute cash into the fixed income investment account. Donors are assigned a specific number of units based on the fair value of their contribution to the pool as a whole. Investment income is distributed to each donor proportionally based on the donors units. When a donor dies, the donor s share in the fund is distributed to the Village. The amounts to be received were recorded at the present value of the contribution based on the donor s life expectancy and a discount rate at the time of contribution. The charitable remainder trust is an arrangement whereby a donor contributes assets in exchange for distributions to a designated beneficiary over the remainder of the beneficiary s life. At the end of that time, the remaining assets will be given to the Village. 21

22 9. Pooled Income Fund and Charitable Remainder Trust, Cont d The charitable remainder trust is administered by a third-party trustee and has its beneficial interest in the trust recorded at fair value based on the present value of the future benefits expected to be received from the trust at the date the agreement was recorded. The discount rate on the present value of expected benefits is 3.25%. Total unamortized discounts for the pooled income fund were approximately $37,000 and $47,000 as of December 31, 2014, and 2013, respectively. Total unamortized discounts for the charitable remainder trust were approximately $211,000 and $223,000 as of December 31, 2014, and 2013, respectively. 10. Line of Credit The Village had a $2,275,000 non-revolving line of credit (LOC) from a bank that expired in June In May 2013, the outstanding LOC of $2,275,000 was paid off with proceeds from a $1,275,000 5-year term loan contributed by S.V.D.P. and a $1,000,000 new revolving LOC from a bank secured by the Village. This revolving LOC allows for advances up to $2,000,000 and requires interest only payments with a maturity date of May 16, Management is currently in negotiations with the bank for an extension of the LOC. The monthly interest payments are calculated using the prime rate plus 1.0%. The rate at December 31, 2014 was 4.25%. S.V.D.P. and MVK are both guarantors on the LOC and it is collateralized by a deed of trust and an Assignment of Rents and Commercial Security Agreement. At December 31, 2014 and 2013 the outstanding balance was $1,500,000 and $1,000,000, respectively. Interest expense related to the LOC was approximately $50,000 and $17,000 for 2014 and 2013, respectively. The LOC has both financial and reporting requirements. At December 31, 2014, management is not aware of any violations of these covenants. 11. Debt In January 2004, S.V.D.P. was awarded a loan of approximately $443,000 from the Emergency Housing Assistance Program (EHAP) of the State of California for the rehabilitation of the Paul Mirabile Center. The loan is secured by a deed of trust on the property and bears interest at 3.0%. The loan and interest will be forgiven in seven years from the project completion date if certain conditions are met. S.V.D.P. assigned its rights under the loan 22

23 11. Debt, Cont d agreement and transferred the loan to the Village in June The Village drew the full amount of the loan. Interest expense related to the loans was approximately $13,000 for The loan and related accrued interest were forgiven in In February 2012, the Village was awarded a loan of $1,000,000 from the EHAP of the State of California for tenant improvements at 15th & Commercial, L.P. The loan is secured by a deed of trust on the property and bears interest at 3.0%. The loan and interest will be forgiven in seven years from the project date of recordation by the County Recorder of the Notice of Completion if certain conditions are met. The Village has drawn the full amount of the loan and the entire balance remains outstanding as of December 31, 2014 and Interest expense related to the loan was $30,000 for 2014 and 2013, respectively. Accrued interest related to the loan was $75,000 and $45,000 for 2014 and 2013, respectively. In September 2013, the Village was awarded a loan of approximately $568,000 from the EHAP of the State of California for tenant improvements at the Village. The loan is secured by a deed of trust on the property and bears interest at 3.0%. The loan and interest will be forgiven in seven years from the project date of recordation by the County Recorder of the Notice of Completion if certain conditions are met. The Village has drawn approximately $568,000 of the loan as of December 31, Interest expense related to the loan was $15,000 for Accrued interest related to the loan was $15,000 for In October 2013, the Village was awarded a loan of $430,000 from the EHAP of the State of California for tenant improvements at the Village. The loan is secured by a deed of trust on the property and bears interest at 3.0%. The loan and interest will be forgiven in seven years from the project date of recordation by the County Recorder of the Notice of Completion if certain conditions are met. The Village has drawn approximately $384,000 of the loan as of December 31, Interest expense related to the loan was approximately $5,000 for Accrued interest related to the loan was $5,000 for In February 2011, the Village obtained a margin loan against its restricted endowment investment account in the amount of $1,000,000 with an interest rate that fluctuates based on the average loan balance for the period. At December 31, 2014, the rate was 3.0%. Interest is paid monthly with income 23

24 11. Debt, Cont d 12. Contingent Liability earned on the investment portfolio. The Village reimburses interest expense to the account on a quarterly basis. The principal balance of the loan is collateralized by the restricted endowment investment portfolio with no required principal payments. The loan continues until paid off or the value of the assets in the investment account decline in value. The Village does not intend to take distributions from the endowment while the margin loan is outstanding. The purpose of the loan is to assist in the funding of general operations. At December 31, 2014 and 2013, the outstanding balance on the loan was approximately $13,000 and $452,000, respectively. Interest expense related to the loan was approximately $12,000 and $15,000 for 2014 and 2013, respectively. The Village is contingently liable as guarantor with respect to approximately $10,601,000 and $11,366,000 of indebtedness of S.V.D.P. at December 31, 2014 and 2013, respectively. The agreements with the bank specific to the above debt require that S.V.D.P. and the Village maintain certain financial and non-financial loan covenants. At December 31, 2014, management is not aware of any violations of these covenants. In May 2012, S.V.D.P. obtained a $1,275,000 commercial real estate loan from a bank that requires monthly payments, matures on May 16, 2017, has a five year amortization and a five year declining prepayment penalty. The interest is calculated using a fixed 4.50% interest. As of December 31, 2014 and 2013 S.V.D.P. owed approximately $1,197,000 and $1,227,000, respectively, on the loan. MVK and the Village are both guarantors on the loan. These loans are cross collateralized by deeds of trust, an Assignment of Rents and Commercial Security Agreement. The loans have both financial and reporting requirements. At December 31, 2014, management is not aware of any violations of these covenants. 24

25 13. Temporarily Restricted Net Assets 14. Permanently Restricted Net Assets The Village s temporarily restricted net assets are comprised of the following: December 31, Restricted for purpose: Educational purposes of children $ 1,038,969 $ - Toussaint Academy San Diego 217, ,765 Restricted for use in future periods: Pledge receivable 1,459,751 - Charitable remainder trust 369, ,769 Pooled income fund 135, ,599 Un-appropriated earnings on donorrestricted permanent endowment 131, ,397 Gift annuity 36, ,131 Totals $ 3,389,322 $ 1,356,661 The Village has adopted the guidance on net asset classification of donorrestricted endowment funds as described in the authoritative guidance. The Village s permanently restricted net assets are comprised of the following: December 31, Restricted for use in future periods: General Endowment $ 2,796,776 $ 2,633,980 Beneficial interest in perpetual trusts: St. Vincent de Paul Village Fund 576, ,655 McEvoy Trust 441, ,715 Charles and Lucille Borgerding Fund 192, ,633 Totals $ 4,007,674 $ 3,830,983 The Village s endowment funds consist of four individual funds, several containing donor restrictions, established to provide funding for general operations, education and children s programs. In accordance with the authoritative guidance, net assets associated with the endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Village has classified as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, (c) accumulations to 25

26 14. Permanently Restricted Net Assets, Cont d the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund and (d) market gains, losses and earnings in excess of distributions from endowment funds under the control of a third party. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted assets until those amounts are appropriated for expenditure by the Village in a manner consistent with the standard of prudence prescribed by the State of California s Uniform Prudent Management of Institutional Funds Act (UPMIFA). In accordance with UPMIFA, the governing board may appropriate for expenditure for the uses and purposes for which an endowment fund is established. As such, much of the net realized and unrealized appreciation in the fair value of the assets of an endowment fund over the historic dollar value of the fund is considered prudent, unless the donor s intention is indicated in the endowment. Endowment net asset composition by the type of fund for the year ended December 31, 2014 is as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ - $ 131,434 $ 4,007,674 $ 4,139,108 Changes in endowment net assets for the year ended December 31, 2014 are as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, January 1, 2014 $ - $ 243,397 $ 3,830,983 $ 4,074,380 Change in value of splitinterest agreements ,048 60,048 Net realized and unrealized loss - (111,963) - (111,963) Contributions , ,121 Release from restriction - - (50,478) (50,478) Endowment net assets, December 31, 2014 $ - $ 131,434 $ 4,007,674 $ 4,139,108 26

27 14. Permanently Restricted Net Assets, Cont d Endowment net asset composition by the type of fund for the year ended December 31, 2013 is as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ - $ 243,397 $ 3,830,983 $ 4,074,380 Changes in endowment net assets for the year ended December 31, 2013 are as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, January 1, 2013 $ - $ 119,728 $ 3,727,291 $ 3,847,019 Change in value of splitinterest agreements ,420 97,420 Net realized and unrealized gain - 123, ,669 Contributions ,800 57,800 Release from restriction - - (51,528) (51,528) Endowment net assets, December 31, 2013 $ - $ 243,397 $ 3,830,983 $ 4,074,380 The Village has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by the endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Village must hold in perpetuity or for a donor-specified period as well as board-designated funds. Under this policy, the funds are invested in a manner intended to produce approximately 5.0% greater than the rate of inflation on a total return basis. Actual returns in any given year may vary from this expected return. To satisfy its long-term rate-of-return objectives, the Village relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Village uses a diversified asset allocation to achieve its long-term objectives within prudent risk parameters. The Village s policy is to appropriate for distribution each year 5.0% of the endowment fund s fair value at a specified time during the year. In establishing the policy, the Village considered the long-term expected return 27